U.S. boosted by digital trade but internet barriers remain -report

WASHINGTON Aug 15 A new U.S. government report
on Thursday highlighted both the growing importance of digital
trade to the United States and a long list of trade barriers
that American internet and other online companies face around
the world.

"The increase in digital trade is having a significant
impact on the U.S. and global economy," the U.S. International
Trade Commission (ITC) said in the first of two reports on the
issue requested by Senate Finance Committee Chairman Max Baucus
at the urging of Senator Ron Wyden, both Democrats.

"This report shows that the digital economy represents an
American trade advantage but it also identified barriers that
are stifling further growth," Wyden said.

As U.S. trade negotiators pursue free trade agreements in
Europe and the Asia-Pacific region, "it is important that these
barriers are addressed so that U.S. digital trade can reach its
full potential as a driving force behind the U.S. economy," the
Oregon senator said.

The study comes as the United States is pushing in trade
talks to open new markets for leading U.S. internet companies
like Amazon, Apple, Facebook, Google and Microsoft, which have
already helped make the United States the world's largest
exporter of digital services.

That has become more complicated after revelations that the
National Security Agency was mining personal data from top U.S.
internet companies including under a secret program named Prism.

The Washington-based Information Technology and Innovation
Foundation this month estimated U.S. cloud computing providers
could lose $21.5 billion to $35.0 billion in revenue over the
next three years if foreign customers decide the risk of storing
data with a U.S. company outweighed the benefits.

The German government responded this week to concerns raised
by the Prism surveillance program by agreeing on initial plans
to boost European technology companies and make them a more
favorable alternative to U.S. peers.

In its report, the ITC acknowledged the difficulty of
estimating digital trade because of the lack of a standard
definition and shortcomings in available data.

But U.S. exports of "digitally-enabled" services, one
measure of digital trade, totaled $356.1 billion in 2011, a
26-percent increase from $282.1 billion in 2007, covering areas
such as financial services, retail services, professional
services, healthcare, logistics and education, the ITC said.

Europe, with its strong internet infrastructure, is the most
important digital trading partner for the United States and is
also an important destination for U.S. digital trade-related
foreign direct investment, the ITC said.

One impediment to increased trade are foreign government
policies that compel digital companies to use local data
servers, technology and inputs or that provide procurement
preferences for local firms, the report said.

Many "localization" requirements are justified on data
privacy grounds, and it is often challenging to determine
whether they are imposed for that purpose or to favor the
country's domestic firms, the ITC said.

Different approaches to data privacy protection can also be
an obstacle to trade, an issue that U.S. firms hope to address
in talks with the 27-nation European Union on the proposed
Transatlantic Trade and Investment Partnership pact.

In another area, U.S. music, book, software and movie
companies view digital piracy of copyrighted material as their
biggest obstacle to increased online exports, while "internet
intermediaries" such as Google and Facebook are more concerned
about foreign laws that could hold them liable for the actions
of users on their networks.

In one instance, "the Italian government brought a criminal
case against several Google executives for a video posted by a
YouTube user that showed the bullying of a disabled student,
despite the fact that Google had a notice and take-down system
in place that resulted in the prompt removal of the video from
the site," the ITC said.

U.S. digital companies complain that censorship in countries
including China, Vietnam and Saudi Arabia also hurts their
business operations, as do restrictive immigration policies and
complicated customs procedures, the ITC said.

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